Red Tape Takes Bigger Toll on Small Canadian Firms than U.S. Peers

Canadian entrepreneurs could be seeing red Monday after a new study found bureaucratic red tape is taking a greater financial toll on them than their U.S. counterparts.

A study by the Canadian Federation of Independent Business found Canadian firms with fewer than five employees pay 5,942 Canadian dollars ($5,991) per employee to comply with government regulations, 45% more than their peers in the U.S.

While not all regulation is considered red tape, Canadian and U.S businesses both say regulatory costs could be reduced by about 30% without harming health and safety objectives, according to CFIB executive vice-president Laura Jones.

“That’s the equivalent of a C$9 billion stimulus package each year with no downside,” Ms. Jones said in the report. One-third of small business owners said they may not have gone into business if they had known about the burden of red tape. Some 68% said red tape reduces productivity.

The reportwas released to kick-off Canada’s annual red tape awareness week, and came as government ministers fanned out to unveil several measures aimed at cutting regulatory costs to boost jobs and growth.

Last fall, Ottawa announced reforms to the federal regulatory system to limit “regulatory creep,” including 90 department-specific changes to eliminate unnecessary paperwork and introduce time-saving measures. Ms. Jones said if Ottawa sticks to the so-called Red Tape Reduction Action Plan, it could be a “game changer for Canada.”

The government unveiled a range of measures early Monday, including proposed changes to food and drug regulations that it said would save pharmacies about C$8.7 million a year in administrative costs. Treasury Board President Tony Clement described Ottawa’s plan to cut red tape as “one of the most far-reaching red tape cutting exercises in the world today.”

The CFIB puts the total cost of regulation to Canadian businesses at C$31 billion a year, a figure that it said has stayed relatively stable since it first started estimating the costs in 2005.

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